A Beginner's Guide to Financial Regulation in Texas

To understand the financial regulatory process in Texas, you need to start with theory. The financial system in the United States represents a network that is the link between lenders and borrowers. This system includes banks and investment firms. In addition, it is the basis of all economic activity in the country.

Based on the Federal Reserve’s statement, financial regulation has two primary purposes: to ensure the safe use of the financial system and to establish and enforce rules that protect consumers. Each individual federal agency has different responsibilities within the regulatory system.

For instance, FDIC (the Federal Deposit Insurance Corporation), OCC (the Office of the Comptroller of the Currency), and the Federal Reserve monitor commercial banks. Other sectors of the financial market are controlled by specific entities.

In this article, you will learn about how interest rates and loan terms are formed in Texas, the statistics in recent years, and the main conditions for taking a personal loan. After reading, you will be able to understand whether such loans are suitable for your personal purposes.

Loan Conditions in Texas

Some states ban payday loans due to their impact on consumer finance and super high-interest rates. But this does not apply to the state of Texas and its inhabitants. To answer the question of are payday loans legal in Texas, you first need to understand how financial transactions are regulated in the United States.

Financial institutions that offer payday loans are regulated by the Texas Financial Code, Chapter 393. You can apply online and offline. You can also have up to two lenders at the same time.

Therefore, many excellent lenders have appeared on the financial services market who are ready to give you a loan at acceptable interest rates. These include PayDaySay, Pheabs, Figloans, and OneMain Financial. We will briefly discuss the criteria for choosing the organization that suits you.

The law that governs financial transactions between a lender and borrowers covers the term of the loan, the limit on the amount of the loan, financial fees and interest rates, penalties for default, and so on.

It is important to note that not all lenders are licensed by the relevant Texas authorities. Most of them apply through standard financial companies in order to simplify the conclusion of loan agreements.

The cap on getting payday loans in Texas is very low. You can reapply for a loan immediately after paying off the first one. However, only 14% of borrowers can repay their borrow on time. Keep this in mind when deciding whether to take out a loan. You need to make a clear plan and calculate the amount that you are comfortable depositing each month.

Rates, Fees, and Other Charges in Texas

Let’s look at the rates, fees, and other charges that you may encounter as a Texas resident. This state has no maximum funding fee, which is relatively low at an annual interest rate of 400+% (per annum).

An acquisition fee may be charged, up to a maximum of $1 for every $5 advanced on any advance less than $40. If the advance is greater than or equal to $30 but less than $100, then acquisition fees may apply to the borrower. However, it cannot exceed one-tenth of the total amount of the cash advance.

An installment account is allowed to process payments for no more than:

$3 per month when the cash advance is less than or equal to $35;
$3.50 per month when the advance is over $35 but not over $70;
$4 per month if the advance amount is more than $70.

For any advance over $100:

An acquisition fee may apply as long as it does not exceed $10;
An installment account maintenance fee may be applied as long as it does not exceed $4 per month for every $100 upfront.

Loan terms also vary depending on the type of loan and credit conditions. Under Texas payday loan laws, the maximum term for a payday loan is 180 days or six months. The calculation is made according to the following principle:

One month for every $10 of cash advanced;
One month for every $20 of cash disbursed if the loan amount is more than $1.

A Texas resident borrower can repay the loan fully before the due date. In this case, the lender must return unearned commissions.

Loan Amounts in Texas

For most borrowers in Texas, there is no credit limit. The credit amount depends on a combination of factors: the lender’s decision, credit rating and history, monthly income, and much more.

The average two-week payday loan is $375, but most lending institutions prefer to lend in the $500 to $1,000 range for individuals with incomes of $5,000 or more. Lenders who have a salary of $10,000 or more per month can easily qualify for loans worth several thousand dollars. If you are going to take a payday loan, then it should not exceed 20% of your monthly income.

Loan Concentrations

In addition to loans for personal needs and payday in Texas, you can take out a loan for small and medium-sized businesses. Various businesses are turning to financial institutions to increase profits in the future by investing in today’s development. This is where lending helps.

For the past three years, commercial real estate has been the unchanging leader. The median percentage of tier 1 capital plus allowance for losses on loans and leases jumped from 179% in 2020 to 197% in the third quarter of 2022, a percentage equivalent of 10.05. In second place is non-residential real estate.

There is a 2.5% drop in the third quarter of 2022 and is 119%. In third place is residential real estate. The median stays at 86-88% for the period 2020-2022. The lowest indicator is for multi-apartment residential real estate and the consumer. In the first case, there is a stable trend of 5%. In the second case, the indicator has changed over the past three years from 14% to 11%, which is a decrease of 21.4%.

Conclusion

As in any other state, you must have a good credit history and rating if you want to take a loan. However, the lender can compromise if you take a loan for personal needs and not for business. But in this case, you will have to be prepared for high credit rates. And as we mentioned earlier, in Texas, borrowers can take two loans from different financial institutions at the same time. Loans before salary do not influence poor credit ratings.

Returning to the topic of regulation, it will be hot that financial markets, financial institutions, and financial products in the United States are controlled by federal agencies and are subordinate to federal laws. The main exception is the insurance industry, which is regulated mainly by individual states. Therefore, all personal loans will be regulated by these three organizations.